Can performance management be humanized? Inside the debate

HCM expert Chris Paine has a delightfully short fuse when it comes to rants on performance management. I found out why. But can his ideas scale to large companies?

It doesn't take much for HCM expert Chris Paine to blast off into a rant on performance management systems, and I wanted to know why. Paine is a respected SAP Mentor based in Australia who has what I call a 'delightfully short fuse' when it comes to performance management.

I could tell from Paine's fierceness on this topic there had to be a back story, so we had a back and forth and pulled it out. In part one, I look at how Paine's skeptical views on performance management systems were formed and how his company (Discovery Consulting) does it differently. I also challenged Paine to address the question of whether his 'humanized' approach to performance and motivation can work in larger organizations.

As we dive in, Paine reminds us these views are his own and do not necessarily reflect the views of his employer.

The roots of Chris' performance management critique

Jon: This isn't the first time you have started a social debate storm with a rant on performance management. What bothers you so much about performance management systems?

Chris: I think this is partly motivated by personal experience. I remember in one of my first jobs being lucky enough to work with a great team of SAP consultants for an SAP HCM/payroll implementation. We were all reasonably young (late 20s/early 30s) really up for the challenge and strongly motivated. Even though we'd all only signed on for one year contracts, we were told about 9 months in that we were to have a performance review - that was the company policy.

Jon: And how did you fare?

Chris: We were told that our rating would contribute to a bonus and we would be stack-ranked. The bonus - when compared to our pay and project completion bonus - was negligible. However, the result on the team interactions and morale was not negligible at all. Cooperation started to be limited to only friends - team members were alienated from each other. Management, which to that point was seen as very benevolent, were suddenly the 'bad guys.' It was clear from the process that the best way to get a bit more pay was to sabotage your colleagues' performance. To me, this was a very bitter experience, and one that I was not keen to repeat.

Jon: Did you continue to butt heads with performance management in future jobs?

Paine in mid-rant

Chris: Yes and no. The next company I joined did not have a performance management process, and I was relieved. However, it was more due to them just not having thought about it. I worked there for 7 years, and during that time, the idea of performance reviews came up time and time again. When I left, it was an optional process that an employee could enroll in if they wanted. Some people just weren't happy without the structure. To me, this was a confusing failure.

HCM projects raised more performance management doubts

Jon: You've also worked on a number of SAP HCM projects. Did that give you a broader view on this issue?

Chris: Yes - I've implemented SAP performance management solutions for multiple customers throughout the world. In all but one case, these were tied to payment bonuses. In all cases, the employees who had to use the solutions hated using them. The number one factor we had to consider in these solutions was to make it as easy as possible to use, because people would use any excuse not to use the solutions. Managers would avoid doing that work if at all possible, employees would avoid filling in the KPIs if at all possible. There would be exceptions, but in general, the process was seen as a chore. The results of the process were, at best, driven by the gut feel of the managers rather than any clearly measured targets.

In one disturbing situation, I had to build a solution that would pro-rate the performance scores of the employees given by their managers so that the total bonus paid would equal a certain amount. The employees had an agreement in their contract that a certain performance score would equal a certain percentage of base salary paid as a bonus. So the scores were moved down until the predetermined amount available for bonus was calculated.

For another company, I was asked to design a mathematical formula to bell curve all performance review results and normalize them. So, again a fixed bonus pool could be used - stealth stack ranking.

A more human approach - but can it scale?

Chris: How did you know? When I left to help form a company - Discovery Consulting - where I now work, we made sure to address this topic head on. We would not have regular performance reviews. Instead, we have regular career goal setting and review sessions. Employees communicate their goals to the company, and the company can suggest a goal - but it is about the employee's desires.

We have business-related goals and personal goals. We believe that if the employee sets the goals, then they will be motivated to achieve them. The review sessions are mainly about ensuring that the measures the company has agreed to help the employee achieve their goals are being actioned. In many ways, it is the opposite of the employee performance review - it's the company performance review by the employee. When it comes to actually managing lapses in performance or improving employee performance, we do this immediately when we see lapses or opportunities occur. There is no benefit in leaving this until a later review period.

Jon: Chris, that sounds like a very human approach. But how would you respond to the critique that your approach might work in smaller companies, but not in larger companies where a formal performance system is needed?

Chris: Size of organization isn't the most important limiting factor. If money is the only/main reason your workforce turns up to work each day, then you are already in a damage limitation situation. If I had an employee who did not want to be at work for any other reason than to be paid, I'm also likely to put in a systematized performance appraisal. Why? So that if and when that employee decides they don't want to do the work, but do want to be paid, I have a way to help them exit my workforce. This is irrespective of company size. However, it is probably true that traditionally larger companies have been less about encouraging talent and more about just getting the job done and scaling up.

Jon: Which gets us into lip service to talent management - a topic where I have a short fuse myself.

Chris: In many of the companies I have advised, talent management is for the top levels of the company only - not for the masses. It is costly in time and resources to implement solutions to start understanding your people. Even just building succession plans based on skills recorded against employees is a big effort, and one that requires much manual assessment and maintenance. The more we can use some of the information that is available to us to help understand who our people really are and what they want, the more we will be able to offer talent management across the organization.

So I can understand that for many areas my ideas wouldn't work as well (if at all), but I believe that where there are benefits in retaining and growing talent, that the value of the approach we use at Discovery Consulting would be more apparent. I'd even suggest that areas like retail might benefit - especially luxury retail. In that case, having someone who is 5 percent more likely to close a deal where the margin is in the thousands is worth investing in (and attempting to retain!) In these areas, someone who is motivated is better than someone who is managed.

I've yet to see a performance management system that actually helps the employees other than the one we're using. In a nutshell: don't do it, but be explicit about why you are not doing it and put in processes to encourage and motivate employees, based on intrinsic motivation rather than extrinsic.